Kaye v Strandbags Group

[2006] NSWSC 1015

CITATION:	Kaye v Strandbags Group [2006] NSWSC 1015
HEARING DATE(S):	20 September 2006
JUDGMENT DATE :	20 September 2006
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
EX TEMPORE JUDGMENT DATE:	09/20/2006
DECISION:	Mandatory orders for disclosure of information made.
CATCHWORDS:	WORDS AND PHRASES – “undertakes” – whether contractual – INJUNCTIONS – covenant to provide information about operations of a proprietary company – whether damages an adequate remedy – INJUNCTIONS – discretionary basis for refusal of injunction that object of covenant not able to be obtained – EQUITY – equitable defences – laches – mere delay
LEGISLATION CITED:	Uniform Civil Procedure Rules 2005
CASES CITED:	Cashman v 7 North Golden Gate Mining Company [1897] QLJ 152 Falconbridge Nickel Mines Limited v Minister for National Revenue [1965] CTC 82 Jones v Dunkel (1959) 101 CLR 298 Knight v Simmonds [1896] 2 Ch 294 Lamshed v Lamshed (1963) 109 CLR 440 Savage v Lunn, NSWCA, 9 March 1998, unreported, BC9800548
PARTIES:	Roger Kaye - First Plaintiff Hyman Shwiel - Second Plaintiff Strandbags Group Pty Ltd - Defendant
FILE NUMBER(S):	SC 1918/06
COUNSEL:	TGR Parker SC; RE Steele - Plaintiffs MJ Dawson - Defendant
SOLICITORS:	Sachs Gerace Lawyers - Plaintiffs TressCox - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

WEDNESDAY 20 SEPTEMBER 2006

1918/06 ROGER KAYE AND ANOR v STRANDBAGS GROUP PTY LIMITED

JUDGMENT – Ex Tempore

1 HIS HONOUR: This is an application for some final mandatory orders concerning the affairs of the defendant company, which I will refer to as Strandbags. It is a retailer of handbags, wallets, travel and business luggage.

2 There are two plaintiffs, Mr Kaye and Mr Shwiel. Mr Kaye, Mr Shwiel and another man established Strandbags in 1983. Mr Kaye was the managing director from 1983 and Mr Shwiel was also involved in its operations. They were both directors of the company. During that period Jalam Pty Limited held 40.25% of the issued capital of Strandbags. The issued capital of Jalam was in turn held as to 27.6% by Oceana Investment Corporation PLC and as to the remainder, by Mr Kaye and Mr Shwiel.

The Settlement Deed

3 Prior to 7 October 1994, Mr Kaye, Mr Shwiel and Jalam had begun proceedings in the Federal Court against Strandbags, Oceana Investment Corporation PLC, and Messrs Lewis, Davies, and Desmarais, who were associated with Strandbags. At that time Strandbags had a different name to its present one. By 7 October 2004 some interlocutory orders had been obtained in those proceedings. On 7 October 2004, the parties to the proceedings entered into a Deed which aimed to settle the dispute from which the proceedings had arisen. That Deed needs to be considered in some detail.

4 By Clause 1 of the Deed, Oceana agreed to provide some additional security which a financier of Strandbags then required to keep a particular finance facility on foot.

5 Clause 2 of the Deed made provision for Mr Kaye to cease to be the managing director, and provided for the terms on which his severance from the company was to occur so far as salary and various other conditions of employment were concerned.

6 Clause 3 provided for the payments which were to be made and court orders which were to be made to settle the Federal Court proceedings.

7 Clause 4 made provision for Mr Shwiel and Mr Kaye to resign as directors of Strandbags.

8 Clauses 5 and 6 gave mutual releases concerning the disputes, and also concerning other matters arising from the prior relationship of the parties.

9 Clause 7 involved Mr Kaye and Mr Shwiel granting to Oceana an option, which was to be exercisable at any time within three years of the date of the Deed, to acquire for $450,000 that number of shares held by Mr Kaye and Mr Shwiel in Jalam that would leave Mr Kaye and Mr Shwiel with the number of shares that they,

“need to hold in Jalam in order to retain an indirect shareholding in [Strandbags] equivalent to five per cent of the issued capital of [Strandbags] as at the date of this deed.”

10 Clause 10 of the Deed provided that Strandbags, Messrs Lewis, Davies and Desmarais and Oceana agreed,

“that they will not, other than as may otherwise be provided under this deed, do or cause or procure anything to be done whereby the shareholding of Jalam, Kaye or Shwiel in [Strandbags] is directly or indirectly diminished or diluted by any means, whether by the issue or allotment of further shares in [Strandbags] pursuant to any options to acquire shares granted by [Strandbags] on or before the date of this deed or otherwise, or by the granting of any options to acquire shares in [Strandbags] in the future.”

11 Clause 10.2 went on to acknowledge that the covenant in Clause 10.1,

“will not prevent [Strandbags] from raising additional funds by issuing additional shares in [Strandbags] where this is absolutely necessary for the preservation of the solvency of [Strandbags].”

12 Clause 13 involved an agreement for the cancellation of any options which Mr Kaye held to acquire shares in Strandbags, and also any options which Messrs Lewis, Davies or Desmarais or Oceana had to have issued to them shares or options in Strandbags.

13 Clause 14 then provided:

“14.1 Each of the Respondents undertakes to Kaye and Shwiel to provide to each of them from time to time, and also on reasonable request, management financial and business information in relation to [Strandbags] to enable Kaye and Shwiel to be reasonably informed of the nature, conduct and financial state of the operations of [Strandbags] including in particular but without limitation:
(a) weekly sales report;
(b) the monthly financial pack provided to directors including but not limited to the profit and loss statement, balance sheet, cash flow and bank covenant schedule;
(c) information, including correspondence, relating to any actual or potential or threatened default, breach or failure to comply with any condition of any lease in respect of which Kaye has given a personal guarantee in respect of the obligations of [Strandbags].”

Post-Deed Events Related to Shareholdings in Strandbags

14 In December of 1997 Mr Kaye transferred to Oceana Investment Corporation PLC 40,181 shares which he held in Jalam, and Mr Shwiel transferred to Oceana Investment Corporation PLC 19,827 shares which he held in Jalam. Those transfers left each of Mr Kaye and Mr Shwiel with 6,210 ordinary shares in Jalam.

15 In October 1995 Strandbags had issued some convertible redeemable notes, which were convertible into ordinary shares on dates in 1996, 1997 and 1998. Attached to each convertible note was an option to acquire one new ordinary share per note. That option was to be exercisable at any time during the two years from 1 October 1998 to 30 September 2000.

Strandbags’ Accounts

16 The company has a financial year which ends on 28 February in any year.

17 The accounts of the company for the period ended 28 February 2005 show that some $686,000 was received in that year from a share issue. A note to the accounts shows that about 15.8 million B ordinary shares partly paid were issued on 24 February 2005. This issue was, apparently, part of an executive share plan. The note also stated that on 30 September 1996 approximately 34.076 million convertible redeemable notes were converted into share capital. It also says that the holders of the 34.076 million new ordinary shares “have an option to subscribe for 34.076 million ordinary shares at 20 cents per share payable in cash. This option is exercisable at any time up to 30 September 2006.” The note also discloses that:

“The company has a commitment to purchase, on call, up to 50 per cent of its class B ordinary shares. This obligation will increase over the next three years to cover one hundred per cent of the class B ordinary shares. The purchase price is based on a multiple of the last annual audited after tax net profits of the company.”

18 Mr Dawson, counsel for Strandbags, tells me, from the Bar table, that the option to subscribe for shares was the same option as was attached to the convertible redeemable notes. While I do not doubt that those are his instructions, it is not apparent from the evidence before me how that could be so, given that the date for exercise of the options attached to the convertible redeemable notes was to expire on 30 September 2000. It is also not apparent from the accounts how the obligation of the company to purchase the class B ordinary shares arose.

19 Recent searches show that the plaintiffs each own 6.2% of the total shareholding in Jalam, and that Jalam in turn holds 9.97% of the shareholding in Strandbags.

20 A comparison of sets of the accounts of the company shows some changes in its operations. In the 1995 financial year it had operating revenue of $59.5 million, and made a loss after income tax of $7.8 million. Its net assets according to the balance sheet were $1.2 million. It had four subsidiaries. The principal activity of it and its subsidiaries was stated in the accounts to be “retailer of handbags, accessories and travel goods in predominantly one industry and one geographical area, namely Australia”.

21 The accounts for the 2006 financial year show that its principal activities were “the speciality retail of handbags, accessories, wallets, business bags and travel goods”. It had an operating revenue of around $156 million, and made a profit of nearly $15 million after income tax. Its net assets according to the balance sheet were around $15.6 million.

The Plaintiffs’ Claims in these Proceedings

22 In these proceedings, the plaintiffs seek mandatory orders to enforce what they say are their rights under Clause 14 of the Settlement Deed.

23 The particular circumstances that led to the case are that, on 13 March 2006 the solicitors for the plaintiffs wrote to Strandbags, setting out the terms of Clause 14.1 of the settlement Deed. The letter continued:

“We are instructed that:
1. The Company ceased some years ago to provide to Kaye and Shwiel the information set out in paragraphs 14.1(a) and (b).
2. The Company has never provided any financial reports or other information to Kaye or Shwiel, despite being requested to do so.
3. According to the financial report for the Company for the year ended 28 February 2005 (a copy of which was obtained by our clients from a shareholder of the Company):
(a) on 28 February 2005, 15,814,800 new partly paid shares were issued to executives of the Company apparently pursuant to an “Executive Share Plan”; and
(b) The Company has outstanding 34,076,689 options exercisable at any time up to 30 September 2006.
On behalf of our clients, we request the Company’s undertaking that it will comply with its obligations clause 14.1 of the Deed by immediately providing the information specified in that clause to enable our clients to be reasonably informed of the current nature content and financial state of the operations of the Company, and by providing such information as relates to the ongoing nature content and financial state of the operations of the Company as that information becomes available in future.
In particular, we request that the Company immediately provide the most recent version of the documents specified in clauses 14.1(a) and (b) and provide future versions of those documents on an ongoing basis.
Further, our clients contend that the Company’s obligations under clause 14.1 extend to the provision of information concerning the issue of shares by the Company and the grant of options by the Company. Accordingly, we request that the Company immediately provide the following information:
(a) please provide full details of all shares issued under the Plan, including the recipient, the date of issue, the number of shares, the amount paid and the terms upon which the balance of any partly paid shares is due;
(b) please advise when the Company proposes next to consider whether to issue further shares under the Plan;
(c) please provide full details of any current options issued by the Company, including the name and address of the holder and the terms upon which the options have been granted, varied or extended.
The request for this specific information should not be seen as derogating from the Company’s obligation under clause 14.1 to provide relevant information without prior request.
We are instructed that, unless by 4.00 pm on Thursday, 16 March 2006, the information sought in this letter is received or suitable undertakings are given that the information will be provided, we are to commence proceedings without further notice to enforce the Company’s obligations under clause 14.1 the Deed.”

24 The proceedings were begun by a Summons which was filed around 17 March 2006. That Summons sought the following relief:

“1. A declaration that the Deed of Settlement made on 7 October 1994 [“the Deed”] is valid.
2. A declaration that the Defendant’s obligations under the Deed are continuing and binding.
3. An order that the Defendant provide the Plaintiffs with full details of all shares issued under the Executive Share Plan (dated on or about 28 February 2005), including name of the recipient of any shares, the date of their issue, the number of shares issued, the amount paid for those shares and the terms upon which the balance of any partly paid shares is due.
4. An order that the Defendant provide the Plaintiffs with full details of any current options issued by it, including the name and address of the holder of such options and the terms upon which the options have been granted, varied or extended.
5. An order that the Defendant provide to the Plaintiffs, and continue to provide to them, all of the information described in clause 14.1 of the Deed.
6. Such further or other order as the Court considers fit.
7. Costs.”

25 On 17 March 2006 the solicitors for the plaintiffs wrote to the solicitors for the defendant, saying

“I note that you act for Strandbags.
I enclose, as a matter of courtesy, Summons and Notice of Motion filed in the Supreme Court this morning, which have been sent directly to your client.”

26 The solicitors for the defendant wrote back to the solicitors for the plaintiffs, saying:

“We refer to your fax letter dated 17 March 2006 which enclosed a Supreme Court Summons under which your clients, Roger Kaye and Hyman Shweil, are named as Plaintiffs and our client, Strandbags Group Pty Limited, is named as Defendant. We confirm that we have been instructed to file a Notice of Appearance, a copy of which will be served on you shortly.
We note in Item 3 of the relief claimed under the Summons that there is an order sought for our client to provide you with:-
“… full details of all shares issued under the Executive Share Plan (dated on or about 28 February 2005), including name of the recipient of any shares, the date of their issue, the number of shares issued, the amount paid for those shares and the terms upon which the balance of any partly paid shares is due.”
In this regard, we provide copies of the following:-
(a) Form 484 (Charge to Company Details) lodged with ASIC on 16 March 2005 in relation to the issue of shares;
(b) Form 281 (Notice that Company intends to Carry Out Buy-Back) lodged with ASIC on 11 November 2005; and
(c) Form 484 (Change to Company Details) lodged with ASIC on 14 December 2005 in relation to share cancellation and company buy-back.
The above forms have been filed with ASIC and, therefore, this information is publicly available to you.
So far as item 4 of the relief claimed under the Summons is concerned, we are instructed that the only current options granted by Strandbags Group Pty Ltd are the options referred to in its financial accounts for the financial year ending 28 February 2005, a copy of which your client already possesses. For your information, the note in the accounts in relation to the options reads as follows:-
“On 30th September, 1996 34,076,689 Convertible Redeemable Notes $6,815,338 were converted into share capital at 20c per share, resulting in the issue of 34,076,689 additional shares at 20c fully paid at that date. The holders of the 34,076,689 new ordinary shares have an option to subscribe for 34,076,689 ordinary shares at 20c per share payable in cash. This option is exercisable at any time up to 30 September, 2006.”
We have been instructed by our client that those options are currently held by the Oceana Group.
We further note that, at this stage, you have not filed any evidence in support of your Notice of Motion for Expedition or the Summons for Relief.”

27 On 21 April 2006 the solicitors for the plaintiffs sent the solicitors for the defendant a draft Statement of Claim which articulated a case which complained about the fact that, in some fashion, options had come to be exercisable up to 30 September 2006, and about the issuing of the B class ordinary shares. It also complained that the obligations under Clause 14 had not been complied with. It sought a mandatory order enforcing Clause 14, and orders for the defendant to take any steps necessary to cancel or rescind the shares and options that the Statement of Claim referred to, or alternatively an enquiry as to damages.

28 The Statement of Claim which was actually filed in the court on 24 April 2006 sought simpler orders than had the draft. It referred to the Deed of Settlement and referred to Clause 14. It then continued:

“5. The Defendant has failed or refused to acknowledge that the Deed is valid and binding upon it.
Particulars
(a) Letter from Sachs Gerace Lawyers to TressCox Lawyers, dated 17 March 2006;
(b) Letter from TressCox Lawyers to Sachs Gerace Lawyers, dated 21 March 2006.
6. The Defendant has failed or refused to comply fully with its obligations under the Deed as set out in paragraph 4 above.
Particulars
(a) Letter from Sachs Gerace Lawyers to TressCox Lawyers, dated 17 March 2006;
(b) Letter from TressCox Lawyers to Sachs Gerace Lawyers, dated 21 March 2006.
7. The First Plaintiff and Second Plaintiff claim:
(a) a declaration that the Deed is valid and binding upon the Defendant;
(b) an order that the Defendant provide each of the First Plaintiff and the Second Plaintiff from time to time, and also on reasonable request, management financial and business information in relation to the Defendant to enable each of the First Plaintiff and the Second Plaintiff to be reasonably informed of the nature, conduct and financial state of the operations of the Defendant in accordance with clause 14.1 of the Deed.
(c) Costs.”

29 The defence asserted, and the defendant's counsel today also asserted, that the particulars were inadequate in that the letter from the plaintiffs' solicitors to the defendant's solicitors of 17 March 2006, and the reply of 21 March 2006, did not amount to a failure or refusal to acknowledge that the Deed was valid and binding, or a failure or refusal to comply with obligations under the Deed.

30 Of course, that is right. When the point was taken in court today, Mr Parker, Senior Counsel for the plaintiffs, immediately said that the reference to the letter of 17 March 2006 was erroneous, and that it was a reference to the letter of 13 March 2006 which was intended. When I enquired of Mr Dawson whether there had ever really been any bona fide doubt that it was the matters referred to in the letter of 13 March 2006 which were being complained about, he was unable to inform me that there was any such bona fide doubt. Under those circumstances, I intend to treat the particulars as referring to the letter of 13 March 2006. No sensible person could ever have thought that the letter of 17 March 2006 was what was really intended by the plaintiffs, given its very rudimentary content.

31 The relief which the plaintiffs seek today is not the relief which was articulated in the Statement of Claim which was filed. Wisely, the plaintiffs have chosen a more focused form of relief, rather than the imprecise relief which the Statement of Claim sought. The particular relief which the plaintiffs seek, in their submissions today, is

“order the Defendant, within fourteen (14) days, to:
(i) advise each of the Plaintiffs when the Defendant proposes next to consider whether to issue further shares under its executive share plan;
(ii) provide to each of the Plaintiffs the details of any current options issued by the Defendant, including the name and address of the holder of such options and the terms upon which such options have been granted, varied or extended; and
(iii) provide to each of the Plaintiffs the most recent version of the documents specified in clauses 14.1(a) and (b) of the Deed.”

Those specific orders are, it seems to me, within the ambit of the relief which had been foreshadowed by the Statement of Claim.

Construction of Clause 14.1

“Undertakes”

32 The first question which arises concerns the construction of Clause 14.1. Mr Dawson, for the defendant, submits that Clause 14.1 does not impose an obligation. He points out that the word “undertakes” can sometimes be used in a way which does not involve a contractual obligation, as when a solicitor gives an undertaking, which is not contractual because there is no consideration for it.

33 He took me to a decision in Falconbridge Nickel Mines Limited v Minister for National Revenue [1965] CTC 82, a decision of the Exchequer Court of Canada, where Cattanach J said, at paragraph 14:

“… undertook” or “undertake” has various senses depending upon the context in which it is used. If it be said that a businessman “undertook” a particular business operation, the word “undertook” indicates only that he embarked upon that operation. If it be said that a solicitor gave an “undertaking” to another solicitor, one does not think primarily in terms of an obligation enforceable by action in the Court. Where, however, a statutory provision speaks, as subsection (7) of Section 83A does, of an agreement under which a corporation “undertook” to incur expenses, there is no doubt in my mind that the statute is speaking of a legally enforceable agreement to incur those expenses. Such conclusion is reinforced by the presence of the words “in consideration for “ “

34 I can readily accept that the word “undertake” and its cognates has these varieties of meaning and indeed it also refers to the business that funeral directors conduct. However, the relevant question is, what does it mean in the context of Clause 14.1? In my view it is quite clear that Clause 14.1, when it says, “each of the respondents undertakes” involves the making of a contractual promise.

“Reasonable Request”

35 The next point which Mr Dawson makes concerning construction is that the obligation in Clause 14.1 is imprecise, insofar as it refers to “reasonable request”. He submits that what that does is to leave an area of discretion to the defendants as to whether a request is reasonable or not. I do not agree. When the law imposes a standard of reasonableness, it is imposing an objective standard.

36 While it is true that if the defendant takes the view that a request is not reasonable, then it will not regard itself as obliged to provide the information requested, it is still a matter for the Court to decide, on an objective basis, whether the defendant is right in taking that view, or not.

“Reasonably Informed”

37 As well, he submits that the expression “reasonably informed” in Clause 14.1 means that Messrs Kaye and Shwiel are entitled to be informed to the extent that is reasonable, having regard to the interests which they have in the company. He points to the way that their interest has been significantly diluted over the years, and submits that it is not reasonable for people who have such a small and indirect economic interest in the company to obtain the sort of information which they seek.

38 I do not agree that that is the correct construction of the clause. In my view the expression “reasonably informed” confers an entitlement to be informed to an extent that is sufficient to provide a reasonable understanding about the nature, conduct and financial state of operations of the company.

“Nature Conduct and Financial State of the Operations”

39 The next question of construction - which I should say is probably a problem raised more by myself than by Mr Dawson - concerns whether “the nature, conduct and financial state of the operations” of the company extends to information about the capital structure of the company, or whether it is confined to its trading activities.

40 Having given the matter more thought, it seems to me that that phrase extends to information concerning the capital structure of the company. There are two reasons for taking this view. The first is that, as a matter of ordinary English, “operations” is substantially equivalent to “activities”. A company engages in activities when it trades, but it also engages in activities when it changes its capital structure. It seems to me that, in the ordinary meaning of the word, each can be part of the “operations of the company”.

41 The fact that the ordinary meaning of the word is capable of extending so wide does not necessarily mean that in fact it extends so wide in the present case. However, in my view, it does extend so wide in the present case. Even in 1994, the company was a holding company. Its operations as such a holding company would inevitably include exercising and receiving the benefit of its rights as a shareholder in its subsidiaries, and participating in the way in which shareholders can, in any variations of the capital structure of the subsidiaries.

42 It would be odd if changes to the capital structure of a subsidiary were part of the “operations” of the company but changes in the capital structure of the company itself were not.

43 As well, Clause 14 needs to be construed in the light of the agreement as a whole, and in a way which gives it business sense. Here, it seems to me that it is important that the agreement contains Clause 10.1, the anti-dilution clause. Knowing whether that clause has been complied with is every bit as important for preserving the ongoing value of the interest of the plaintiffs in the company, as is knowing about the trading activities of the company.

44 As well, if the company were to engage in raising money through debt, that raising of debt would be part of its operations. A company can, for commercial reasons, have a real choice open to it as to whether in particular circumstances it will raise money through debt, or by issuing equity. It would, it seems to me, be commercially odd if the former needed to be disclosed, but the latter did not.

Application of Clause 14 to Facts of This Case

45 As a matter of construction, Clause 14.1 provides two different types of obligation on each of the parties named as respondents in the Deed. The first is, voluntarily and without prompting, to provide to each of Mr Kaye and Mr Shwiel the type of information Clause 14.1 describes. That obligation is to be performed from time to time. As well, each of those respondents undertakes also to provide that type of information on reasonable request.

46 The type of information which is contained, or which is referred to, in the orders which the plaintiffs seek, is, it seems to me, the type of information which is needed to enable Mr Kaye and Mr Shwiel to be reasonably informed of the nature, conduct and financial state of the operations of the company.

Whether Mandatory Orders are Appropriate Relief

Continuous Supervision?

47 The defendant raised a number of reasons why it would be inappropriate to grant any mandatory order to enforce Clause 14.1. One reason was that the order would involve the Court in continuous supervision. It is not apparent to me that the limited orders which the plaintiffs seek today are ones which would involve continuous supervision. Those orders are quite specific, and are to be performed only once.

48 Of course, if there is a failure to comply with Clause 14.1 in the future, that might provide the occasion for other specific orders to be sought, but that is not a possibility which the plaintiffs are trying to deal with by the orders they seek today.

Damages an Adequate Remedy?

49 The next submission which the defendant makes is that damages should be an adequate remedy. I do not accept that that is so. The company is a proprietary limited company. Information about its operations is not readily publicly available. It seems to me to be unrealistic to contemplate that the plaintiffs would be able to establish the damage that they had suffered by not having information, when they are in a situation of not knowing what is the information which they lack.

50 It seems to me that the subject matter of the clause is the type of subject matter, like the subject matter of a contract for the sale of land, concerning which damages are inherently an inadequate remedy.

Object of Covenant Not Able to be Obtained?

51 Another basis on which the defendant opposes relief is that the object of the covenant can no longer be obtained. I was referred to the decision in Knight v Simmonds [1896] 2 Ch 294. That case concerned an application for an injunction to enforce a restrictive covenant on a building lot. It was refused on the ground that there had been a change in the character of the neighbourhood. Lindley LJ at page 297, said:

“But, further, before granting equitable relief, Courts of Equity look not only to the words of the covenant, but to the object to attain which it was entered into, and if, owing to circumstances which have occurred since it was entered into, that object cannot be attained, equitable relief will be refused.”

52 That statement of principle is, with respect, undoubtedly correct. In the circumstances where a restrictive covenant has been placed on land, with a view to preserving the character of a neighbourhood, and there has been a change in the character of the neighbourhood, the object of the covenant can no longer be achieved, and it would be a pointless annoyance to require it to be performed.

53 While the principle is undoubted, it does not seem to me that it is applicable in the present case. The provisions of Clause 10 had the effect that the plaintiffs would have an interest, in the nature of a carried interest, in the ongoing operations of the company that they had been involved in establishing, but which they were, as a consequence of the Deed of Settlement, quitting.

54 The way in which they held their interest was not as direct shareholders, but only indirectly, through Jalam. Thus, the plaintiffs did not have even the rights which the Corporations Law confers on shareholders, concerning the operations of the company. The object of Clause 14, it seems to me, was so that they could be kept informed about the activities of the company, so that the value of their ongoing interest in the company could be protected.

55 It is true that their interest has come to be eroded to less than the 5 percent carried economic interest that Clause 10 contemplated. There is not material before me today which enables me to say whether that erosion has happened in the way which the Deed contemplated, or not. However, even if it were the case that an erosion had happened in a way that the Deed contemplated, the interest which they still retain in the company is, given the figures which emerge from its recent balance sheet, which I have earlier mentioned, certainly not so small that it should be disregarded. In my view the object of the covenant is still capable of being attained.

Delay

56 The next basis upon which the defendant opposes any specific relief is one of delay and acquiescence. Even though there were pleadings, the defendant’s defence did not raise any defence of laches. I reject the submission that laches is a defence which does not need to be pleaded. Uniform Civil Procedure Rules 14.14 provides:

“(2) In a defence or subsequent pleading, a party must plead specifically any matter:
(a) that, if not pleaded specifically, may take the opposite party by surprise, or
(b) that the party alleges makes any claim, defence or other case of the opposite party not maintainable,
…”

57 Laches falls within that rule. Even though Mr Parker pointed this out, he still dealt with the merits of the allegation of laches. I shall do the same.

58 The defendant submits that there was no request made until March 2006 for information, and that that involved a delay of twelve years. The only evidence before me of any request for information, and either refusal or failure to provide information, is the correspondence which began in March this year. The defendant submits that I ought to draw a Jones v Dunkel (1959) 101 CLR 298 inference that no information was earlier sought.

59 The Jones v Dunkel (1959) 101 CLR 298 inference arises when a court would draw an inference from the material which is before it, and a party who could call evidence to cast light on the topic of that inference, fails to call that evidence. In those circumstances, the Court is entitled to draw more strongly the inference which is otherwise available to it. In the circumstances where there was no allegation of laches on the pleadings, there was no occasion, in my view, for the plaintiffs to put on any evidence about any prior requests for information.

60 There is another answer to the laches claim as well. Even if there had been no request made for information until March 2006, I do not think this would matter. One reason is that the clause is one which requires information to be volunteered from time to time, and also provided when requested. Because it imposes continuing obligations, any failure to comply with it that there might have been prior to March 2006, does not lead to a conclusion that there has been an acquiescence in the obligation under Clause 14 fading away.

61 What is involved in the cause of action asserted today is breach alleged to have arisen from a failure to provide the information in March of this year.

62 There are two different types of laches. Griffith CJ said in Cashman v 7 North Golden Gate Mining Company [1897] QLJ 152 at 153-4:

“Now the term acquiescence is not a term of art. It was used in Courts of Equity as a term to characterise a defence which may be set up by a person against whom another makes a claim for equitable relief. It is a well-known doctrine of equity that when a person claiming equitable relief has lain by for a long time, and so conducted himself that it would be inequitable to permit him to complain of the defendant’s actions, the court will refuse to grant the relief. That was called acquiescence; and the term is a convenient one to describe that defence. The term also bears another meaning. It may be fairly applied to a man who, seeing an act about to be done to his prejudice, stands by and does not object to it. He may be very properly said to be acquiescing in that act being done. But the difference in point of law in the legal consequences of the two kinds of acquiescence is quite clear. A man who stands by and sees an act about to be done which will be injurious to himself, and makes no objection, cannot complain of that act as a wrong at all. He never has any right of action, because he stands by and allows the act to be done. Acquiescence in the other sense is a defence to an action for specific relief, on the ground that a plaintiff cannot be reinstated in his original position without doing injustice to the defendant, but it is not an answer to a cause of action already accrued.”

63 In the present case, the defendant does not assert that it has done anything in reliance upon an apparent non assertion of the right. Thus, the defence of laches is one which relates to mere delay. In Lamshed v Lamshed (1963) 109 CLR 440 at 452-3, Kitto J, with whom Windeyer J agreed, said:

“… the special remedy of specific performance is available to those only who are prompt to claim it. The degree of promptness required depends on the nature of the case and all its circumstances: Eads v Williams (1854) 4 DeG M & G 674, at p.691 [43 ER 671 at p.678]; Barclay v Messenger (1874) 43 LJ Ch 449, at p.456. Accordingly there is little point in citing cases for the purpose of comparing the period of delay in the present case with the delay which has been considered fatal to claims for specific performance in the circumstances of other cases. The bare fact of delay is not enough. Where there is nothing at all in the circumstances to justify either a conclusion that the delay has been to the prejudice of the defendant or of any third party, or a conclusion that the plaintiff ought to be regarded as having abandoned any rights he ever had, specific performance is not ordinarily refused: Fitzgerald v Masters (1956) 95 CLR at p.433.”

64 In the present case, when there is no prejudice asserted to the defendant or any third party, and when I do not conclude that the plaintiffs ought to be regarded as having abandoned any rights they ever had, the occasion for the defence does not arise. See also to the same effect, Meagher, Gummow and Lehane Equity Doctrine and Remedies, 4th Edition, 36-070 and 36-080, and the decision of the Court of Appeal in Savage v Lunn NSWCA, 9 March 1998, unreported, BC 9800548.

Orders

65 In these circumstances it is, in my view, appropriate to make orders of the general type which the plaintiffs seek. At the time the litigation began, the plaintiffs were, it seems to me, entitled to be in some doubt about whether the defendant conceded that it remained bound by the terms of Clause 14.1 of the Deed. Since the litigation has been on foot, the defendant’s attitude in that respect has been made clearer, in that it now concedes that it is bound by Clause 14.1.

66 In those circumstances, and for the reason that there is now no issue about it, it is inappropriate to make the two declarations which the plaintiffs sought in their submissions. However, it is, in my view, appropriate to make the specific mandatory orders.

67 I order the defendant, within fourteen days, to:

1. Advise each of the plaintiffs when the defendant proposes next to consider whether to issue further shares under its Executive Share Plan.

2. Provide to each of the plaintiffs the details of any current options issued by the defendant, including the name and address of the holder of such options and the terms upon which such options have been granted, varied or extended.

3. Provide to each of the plaintiffs the most recent version of the documents specified in Clause 14.1(a) and (b) of the Deed of Settlement dated 7 October 1994, to which the plaintiffs and the defendant are all parties.

* * * * * * * * * *

Costs

68 The plaintiffs apply for the costs of the proceedings. In connection with that application the defendant has tendered some correspondence passing between the solicitors. The first is a letter from the defendant’s solicitor of 31 May 2006, which provided annual audited accounts, and an unaudited interim report covering the first six months of the financial year, which included a profit and loss account and a balance sheet.

69 The letter asserted:

“… this financial information is sufficient to enable your clients to be reasonably informed of the nature, conduct and financial state of the operations of Strandbags and, more importantly for your client, to assess and monitor their indirect investment in Strandbags.”

70 As is apparent from the terms of the judgment I have given, I do not agree that that information is sufficient.

71 The next letter is a letter from the defendant’s solicitors of 8 June 2006 which acknowledged an obligation to keep the plaintiffs “reasonably informed of the nature, conduct and financial state of the operations of [Strandbags]”. It went on, however, to assert that the nature of the information which was needed has materially changed since 1994. It invited negotiation about disclosure of some reduced ambit of information.

72 On 16 June 2006 the plaintiffs’ solicitors wrote back. They pointed out that the particular documents referred to in Clause 14(a) and (b) had not been provided, and that there was an obligation for them to be continually produced. It sought an acknowledgment that there was an obligation to provide those documents. It sought information, as had previously been requested on 13 March 2006, but not supplied, concerning the particulars of shares issued under the Executive Share Plan, and the options issued by the company.

73 The response of the solicitors for the defendant, on 21 July, was to invite further discussion about why it was that the plaintiffs required the information they were asking for.

74 None of that correspondence shows, in my view, that the conduct of the plaintiffs in continuing the litigation was unreasonable.

75 Mr Dawson also submits that the orders which the plaintiffs have been seeking have contracted in scope since the plaintiffs’ submissions were made available on Friday of last week. He points out that it is the orders which the plaintiffs notified on Friday of last week, rather than those which were claimed in the Statement of Claim, that I have made. All that is perfectly true.

76 Nonetheless, the orders claimed are ones which were within the scope of the relief which the plaintiffs originally claimed. When served with submissions that set out the reduced scope of orders which were claimed, the defendant did not consent to orders in those terms, but continued to argue the case.

77 I order the defendant to pay the costs of the plaintiffs. I also order the orders may be entered forthwith.

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